Nestle’s Global E-Business

Global businesses don’t come much bigger than 135-year-old NestlŽ. The Switzerland-based company ranked as the world’s largest food producer even before its proposed acquisition of Ralston Purina, expected to be completed by the end of this year.

In some 70 countries around the globe, 230,000 people and just under 500 factories strive to bring 8,000 products to the world’s tables?NescafŽ instant coffee, of course, but also Perrier bottled water, breakfast cereals including Cheerios, KitKat bars, Stouffer’s prepared meals, Buitoni pasta and Maggi cooking sauces.

From his office at the company’s headquarters in Vevey, on the shores of Lake Geneva, NestlŽ’s senior vice president of group information systems and logistics, Jean Claude Dispaux, occupies a place at the cutting edge of global business. It’s a place shaped by the combination of NestlŽ’s worldwide scope and CEO Peter Brabeck-Letmathe’s commitment to an “e-revolution” to boost revenues and slash $3 billion from the cost base. Dispaux’s role calls for a firm, hands-on approach, experiencing for himself how NestlŽ’s far-flung operations can play their part in consolidating and standardizing the food giant’s business processes to reach Brabeck-Letmathe’s goal.

While reported accounts of bloodletting at the top suggest that some executives were slow to get Brabeck-Letmathe’s message, the new regime seems to have been a case of steady-as-you-go for Dispaux. In the job for almost 11 years, he’s fiercely proud of the progress that has been made in welding NestlŽ’s widely scattered forces into a coherent whole.

“Ten years ago, we had every spreadsheet and word processing program you’d ever heard of?now there’s Microsoft Office,” he says. “There was a time when you couldn’t send an e-mail from the U.S. to the U.K., and now you can send an e-mail from anywhere to anywhere.” When he came into the job, he adds, an informal audit showed that NestlŽ had around 140 different financial systems?now it’s down to a handful, and there will ultimately be only one, SAP.

Improved technology has helped in the consolidation, but so have the impact of trade liberalization and the easing of Cold War tensions. “These days, my constituency is much more homogenous than it was 10 years ago,” Dispaux says. “Then, there were countries such as India and Brazil into which you couldn’t import AS/400s, and the Eastern bloc was pretty much untouchable. Now, we deal with Russia like we do with Spain.”

Roughly two-thirds of NestlŽ runs on the SAP R/3 enterprise resource planning system, the result of an implementation begun in 1991. Smaller subsidiaries use a set of PC-based or AS/400-based systems, reflecting the needs of their local markets. That’s the case in Syria, for example, where by law invoices must be printed in Arabic. About a dozen Far Eastern countries rely on System Software Associates’ (SSA) BPCS ERP platform. The reason: In the early 1990s, SAP either had no presence in these countries or local languages called for special character sets. “SSA had a presence and also had the required character sets?so we said we’ll standardize on SAP when it had these, which it does today,” Dispaux explains.

This in part explains the deal Dispaux inked with SAP in June 2000. Worth more than 200 million euros (about US$195 million) over 10 years, “neither we nor SAP are aware of a bigger contract for packaged software,” asserts Dispaux. The contract’s terms are equally sweeping. “Paraphrasing it, it’s basically everything they have, for all our employees?licenses, maintenance and new modules. I didn’t want to nickel and dime it, or break it down by geographies or functions.”

Dispaux and other senior NestlŽ executives?especially Brabeck-Letmathe?intend to use the SAP platform as a tool to shake up those parts of the business still attached to the sclerotic ways of the past. The difference between today’s systems and those of tomorrow, says Dispaux, is that today’s systems were essentially laid on top of whatever business processes happened to exist in the country in question. “This time,” Dispaux stresses, “we want to standardize the rules and business processes?and then implement the software.”

A tall order, but one made easier by a top-level commitment to e-commerce. In the United States, for example, NestlŽ has launched a Web-based ordering system intended to eliminate many of the 100,000 phoned or faxed orders that the company receives yearly from small stores. While Dispaux acknowledges that the system isn’t wholly applicable on a global basis?”there are still some countries where we replenish [store’s shelves] directly from our van, getting paid on the spot with whatever money is in the till”?he sees no reason why it shouldn’t serve as a model for most countries. In this respect, he believes, the U.S. market is simply ahead of the rest of the world, rather than fundamentally different from it.

NestlŽ is also a founding member of not one but two e-marketplaces: Transora, backed by the Grocery Manufacturers of America, and CPGmarket.com, a European initiative backed by NestlŽ French dairy foods giant Danone, SAP, Accenture and German detergent and beauty-care maker Henkel. As opposed to putting simple price pressure on suppliers, CPGmarket.com is intended to actively encourage suppliers and customers to strip cost out of transactions by building in standardized features such as electronic payment and logistics services.

Not that standardization is always the answer, everywhere; sometimes the locals know best, observes Dispaux. “It’s horribly dangerous to observe the world from an office?you can’t rely on reports,” he insists. Because of this philosophy, he’s an inveterate traveler and takes great pleasure in getting close to local markets. Heads might shake in puzzlement, he says, when he expresses a desire to the local management to travel from store to store in Hong Kong in a salesman’s van, but the resulting insights would certainly be difficult to obtain any other way.

A while ago, he explains, he was standing at a milk collection point in the north of China at 4 a.m. on a particularly freezing morning. “I went there thinking that I knew exactly what they needed, and I came away knowing that the standard European solution wouldn’t work?not with an erratic electricity supply, in an environment where things of value can ’disappear’ and in temperatures where people aren’t going to want to take their gloves off to work the keyboard. After such an experience, when you see a request for nonstandard local equipment, you view it more sympathetically.” n